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Liability insurance crunch is squeezing multifamily housing operators
In 2023 there were 89 “nuclear verdicts” totaling about $14.5 billion, but 2024 saw 135 such verdicts with awards reaching into the tens of billions, worsening insurer tightening.
Commercial Observer reports that liability insurance costs and availability have become a fast-rising expense for multifamily property owners across the U.S., threatening operations and potentially slowing housing development.
The outlet cites the rise of large jury awards, describing so-called “nuclear verdicts” as a key driver. In 2023, there were 89 nuclear verdicts totaling roughly $14.5 billion in awards, and in 2024 those numbers increased to 135, with awards ballooning into the tens of billions.
According to Commercial Observer, insurers have responded to what the market calls “social inflation” by tightening policy terms, raising prices, narrowing capacity, and carving out or reducing limits for certain high-severity risks.
The article says the lending impact is already visible, with agency guidance including from mortgage buyers such as Fannie Mae and Freddie Mac expecting general liability and umbrella policies to cover serious exposures without exclusion or crippling sublimits, such as assault and battery, firearms, sexual abuse and molestation, and habitability failures. Where coverage is not available, lenders are in some cases asking for reserves of $250,000 or more for each excluded exposure, which erodes net operating income and can push projected returns into the red.
Commercial Observer adds that owners are using interim measures to keep deals moving, including lender waivers tied to loss-control programs, specialty stand-alone policies for excluded exposures, larger self-insured retentions, captive arrangements, and layered liability structures.